Thursday, February 21, 2013

Health Care End Game Predictable

Ever notice how quickly the health care debate turns to insurance? It has long seemed to me that this is just a trick to advance redistribution under a different mechanism, because first you conflate insurance with health care, then start regulating in such a way that everyone is treated the same by the insurer regardless of the riskiness of the insured. In such a system, low risk people will try to opt out entirely or form groups that exclude high risk people (say, by having a company of young healthy people form a self-insurance plan).

Maintaining the pooling equilibrium as health care costs increase is going to be really hard. If it turns out to be impossible--well, then, the ACA system will lurch toward pay-or-play and then single-payer.

Markets break down if low cost people are grouped with high cost people; someone with diabetes will cost more than a healthy person actuarily, and healthy people understand that and try to avoid being in their group. The only way to avoid this is to use force, and so like public schools or postage, have everyone charged the same, and queue the same.

Aristotle had this all explained in his Politics (book 3), where he notes all justice is equality, but the question is really equality of what? Egalitarians want more redistributive equality that generates equal positive rights to goods and services, whereas libertarians want more equality of negative rights, such as our equal right not to be assaulted.
I can empathize with the egalitarians, as envy is a fundamental instinct. Yet I think this is not a good objective because it neglects the fact that if you make positive rights equal, then everyone has an incentive to free ride, and this encourages the worst in people. Further, in egalitarian societies like the old Soviet Union or China, it was not as if there was ever euality of positive rights. As H.L.Mencken noted:

The chief difference between free capitalism and State socialism seems to be this: that under the former a man pursues his own advantage openly, frankly and honestly, whereas under the latter he does so hypocritically and under false pretenses.

I'm not optimistic libertarian preferences will prevail in a direct democracy as opposed to a democratic republic, as more and more republican guards against mob rule are dismantled every generation.

20 comments:

The distinction between negative rights and positive rights is all well and good, but US law (since the Reagan Administration) essentially says you've got a positive right to health care. And no one is going to get elected on a platform of letting the sick and injured lay untreated in the streets, so let's start from the premise that we are going to treat people, whether or not they can afford to pay.

Once we acknowledge that, we can talk about how best to pay for all that health care. I think you'd probably agree that it would help us pay for it if all Americans had health insurance covering at least catastrophic expenses. So how do you make that happen?

The prospect of bankruptcy in the event of catastrophic illness or injury would prompt most Americans who can afford it to buy health insurance, but some (due to preexisting conditions, low income, or a combination thereof) won't be able to afford health insurance at market rates. And others who can afford it, will choose not to pay for it, and free-ride instead.

The solution here seems pretty straightforward: mandate that everyone have at least catastrophic health insurance coverage, and subsidize those who truly can't afford it at market rates.

That was the Romney approach in MA, and, IIRC, it was mooted years before by a conservative think tank.

In light of all that, Republicans deciding to make opposition to the insurance mandate the hill they wanted to die on doesn't make much sense to me. Wouldn't it have been better to 1) agree to the general approach above; 2) try to steer the details toward the preservation of market elements to the extent possible; 3) point out that not enforcing our immigration laws increases health care costs; etc.?

"Markets break down if low cost people are grouped with high cost people" You could say the same thing about nations. Immigration from "dead weight" demographic groups, the growing non-productive underclass, and the parasitic political over-class will eventually rip the social fabric to such a degree that any pretense at a nation evaporates. You can always tell who the parasites are. They are the ones who want to prevent others from leaving and forming lower risk, more productive insurance schemes - and nations.

Dan: I agree that US law is going there, though those aren't my personal preference. I think a subsidized catastrophic policy (eg, expense over $10k) would be an improvement if coupled with a deregulated <$10k market. Currently I can't buy health insurance from out of state, or that doesn't cover abortions, and other things I know I won't use. I don't think Democrats would allow that.

Originally the Medicare Advantage program was a classic example of stealth screening although recent changes and Obamacare have/will probably sweep all this away. Under this program the Feds pay private insurers the median cost of all Medicare participants (there’s a different median cost for each state) if they provide the same coverage to any people they sign up. If the people the insurance companies sign up end up costing them less than that median cost figure (per year) they make money, if more they lose money. The idea here was that private insurers would be more efficient and the whole thing would end up being a big win-win for everybody.

Well, in MA at least the private insurers concocted all kinds of schemes that were not technically illegal (discriminatory) but were nonetheless effective at weeding out many higher risk people. The pitch would be “Come one, come all!” but the information sessions (or whatever) would be held at night on the upper floors of buildings with no elevators – which took care of a lot of older and infirm people, offering free gym memberships attracted a lot of younger people etc. So, pretty soon the government ended up with a disproportionate amount of high cost patients as the private insurers siphoned off the lowest risk participants and made a killing.

Also, at this point “health insurance” isn’t really insurance anymore much less a synonym for health care. The more things health insurance is required to cover outside of the expensive, hard to predict and infrequent the less it can honestly be called insurance. Your car insurance doesn’t cover oil changes, why should health insurance cover something like birth control?

State health insurance is a redistribution system. It works when the coverage is limited to the basics, and people needs to buy additional insurance in the free market for treatments not covered by the State scheme. It rapidly develops into a two tiered health system. You need a heart operation? You can wait a year in the public system or you can buy additional insurance or pay a private hospital. Vide Israel.

2:55 anonymous: That's exactly the point. The uninsured will go to the hospital, which will treat them. Generally speaking hospitals are not cheap to operate. Who pays for this care? You have to work out some split between other patients and taxpayers. Nobody else is putting money into the hospital.

The distribution of positive rights is intimately related to the distribution of negative rights. High levels of income inequality is related to crime and other forms of exploitation that affect those lower on the distribution with more frequency.

Most free-market supporters think insurance is a good idea, so therefore it behoves the supporters of redistribution to couch it in terms of insurance, rather than open and blatant money grabbing.

You are quite correct that the difference is whether people have the option to voluntarily form groups of their choosing, or whether they are all lumped by external force into a single group.

For example, in Australia, it is perfectly legal for an insurance company to discriminate with their pricing of vehicle insurance on the basis of whether the customer is female or male; however it is illegal for an ice cream shop to discriminate in the same manner.

I'm not sure I get the distinction between negative and positive rights. Public healthcare can be formulated as a negative right: the right not to be crippled by diabetes.

The free riding issue is there with negative rights as well, e.g. if you implement competently the right not to be assaulted with an efficient police force, it allows people to engage in high risk of assault behaviour knowing they can helicopter in the cops at the first sign of trouble, said helicopter being paid for by those who stay at home quietly and rarely need the cops and their helicopter.

In both cases the free riding potential is bounded by most people not trying to get diabetes or beaten up just for fun (e.g. the rights are about providing remedies for intrinsically unpleasant things).

Why should an Australian ice cream stand discriminate against some clients?

I imagine it could refuse selling to people without milk tolerance enzime like Asians and Africans so to avoid being sued. It could also make them sign a legal document that they are milk protein tolerant.

The reason you can't buy catastrophic plans is that they're generally illegal. Government knows best.

The preexisting condition bit is weird, because a market should exist for insurance with excluded conditions. Even if you're a total basketcase you should be able to buy coverage for accidents, but you can't (and it would be cheap besides). I suspect government is at fault here.

I would argue that the long term plan for Obamacare is for it to wipe out insurance companies and cause the sheeple to clamor for the government to "do something" and speed the introduction of single payer.

By treating the entire system, Dr. Kathleen targets the organ imbalances that are reflected on our face in the form of lines, fluid sacks, jowels, and discoloration. So the patient can often enjoy both a rejuvenated face AND improved health!

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